Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Preferred Stock

Financial Accounting

12. Stockholders' Equity

Preferred Stock

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Multiple Choice

Which of the following statements about preferred stock is true?

Preferred stockholders generally have priority over common stockholders when it comes to dividend payments.

Dividends on preferred stock are always guaranteed and must be paid every year.

Preferred stock cannot be converted into common stock under any circumstances.

Preferred stockholders typically have voting rights in corporate decisions.

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Verified step by step guidance

Understand the concept of preferred stock: Preferred stock is a type of equity security that typically has priority over common stock in terms of dividend payments and claims on assets in the event of liquidation.

Analyze the statement about dividend payments: Preferred stockholders generally have priority over common stockholders when it comes to dividend payments. This is true because preferred stockholders are entitled to receive dividends before any dividends are paid to common stockholders.

Evaluate the statement about guaranteed dividends: Dividends on preferred stock are not always guaranteed. While preferred stockholders have a higher claim to dividends, the payment of dividends depends on the company's profitability and decision by the board of directors.

Assess the statement about conversion: Preferred stock can often be converted into common stock under certain circumstances, depending on the terms set by the issuing company. Therefore, the statement that preferred stock cannot be converted is false.

Review the statement about voting rights: Preferred stockholders typically do not have voting rights in corporate decisions, unlike common stockholders. This is a distinguishing feature of preferred stock.